May 20, 2013

Loophole Exploited in Anadarko Petroleum Flash Crash

Themis
Trading on the loophole exploited by HFT’s which took the price down to
$0.01 per share.

Two things should have protected your stock from crashing:
circuit breakers and the elimination of stub quotes. However, the new Limit up/Limit Down (LULD) circuit breaker
system did not activate. LULD does not apply after 15:30 pm during Phase 1 of
its rollout. Also, stub quotes, which
were supposedly banned by the SEC, were still in place and allowed your stock
to trade at $0.01/share. The $0.01/share trades occurred on NYSE, which used to
have an LRP system that would have prevented this from occurring. But once LULD went into effect, NYSE removed
their LRP system. Essentially, recently
enacted stock exchange regulations left your stock unprotected.